Which of the Following Is Not an Assumption of the Simple

question 50

Multiple Choice

Which of the following is not an assumption of the simple multiplier formula?

• A)The economy has excess capacity and room to expand output.
• B)Firms will raise prices as buyers buy more of their output.
• C)People will spend more if they earn additional income.
• D)Business firms will increase production if demand for their output increases.

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Definitions:

Trade Deficit

A situation in which a country's imports exceed its exports, leading to more money flowing out of the country than coming in.

Net Exports

The difference between what a country sells to others and what it buys, represented by exports minus imports.

Goods And Services

The products (goods) and activities (services) that are produced and provided to satisfy consumers' wants and needs.

Trade Balance

The difference between the monetary value of a nation's exports and imports over a certain period, indicating a surplus if exports exceed imports or a deficit otherwise.